Top paid US bosses rake in $2.2bn

THE more you pay them, the worse they do. That is the lesson emerging from the US, where companies led by chief executives with the heftiest pay packets dominate the worst performers' list.

Executives who thought they were geniuses during the 'greed is good' days of the Nineties, which coincided with the longest economic boom in US history, are having to justify take-home packages stuffed with share options, interest-free loans, sports and concert tickets, saunas, executive jets, chauffeur-driven cars and luxury holidays.

All too often, executives who raked in huge salaries just before the internet and technology bubble burst two years ago were presiding over companies that are now under fire for murky disclosure and dodgy accounting practices.

A list of the best-paid executives of 1999, compiled by Business Week magazine, shows the top 20 pocketing $2.2 billion between them. It puts Charles Wang, chief executive of software company Computer Associates, at number one with pay, bonuses and share options totalling a staggering $651 million (£455 million). Two other Computer Associates directors shared almost half a billion dollars.

But last week, Computer Associates shares plunged after reports that the FBI and the US Attorney's office were investigating whether the company had inflated sales figures to justify higher share prices so that executives would receive bigger bonuses. The company has lost about half its market value - or $11 billion - since Wang's big payday.

Other companies, such as IBM, General Electric and Tyco, whose chief executives are also near the top of the list, have recently had their accounting methods queried. They include network switching group Cisco Systems, whose chief executive John Chambers was paid $121 million in 1999. Cisco shares have since plunged by 80% from their peak.

The focus on corporate earnings - and the way bosses are rewarded - has sharpened since the recent spectacular collapse of energy trader Enron.

Once the seventh-biggest US company, Enron filed for the largest bankruptcy in corporate history amid allegations of crooked accounting.

Before the collapse last December, chief executive and chairman Kenneth Lay received a $43.8 million pay packet. And Jeffrey Skilling, Lay's hand-picked successor as chief executive, took home $46.4 million in the same year.

The biggest pay packet of all time went to Steven Jobs, chief executive of Apple Computers in January 2000. His $1 billion package included a $40 million-jet and 10 million Apple shares. Since then, Apple has lost roughly 60% or $ 15 billion of its market value.

As the megapay trend catches on in Britain, the issue of executive pay is under scrutiny in the US. Angry shareholders are demanding that companies justify their pay policies in the face of plunging share values. They are concerned that linking pay to share price performance encourages executives to cut corners.

Unions, represented by the American Federation of Labor - Congress of Industrial Organisations, say board members should stand up to greedy executives.

The AFL-CIO claims the average chief executive of a top US company earns more than 500 times the average manual worker.

Toby Sheppard-Bloch, research analyst with the AFL-CIO, said: 'There's no relationship any more between what workers earn and what the average CEO earns. When things go bad at a company, they either re-price the share options package or give the CEO more cash. It's ridiculous.'

Charles Belson, who runs the University of Delaware's Center for Corporate Governance, said the relationship between pay and accounting and disclosure issues was becoming clearer.

'The potential is there for company results to be skewed so that executives can feather their own nests.

'What it indicates to me is that nonexecutive directors are not sufficiently independent and do not have enough at stake in the companies they serve. We need directors who are for the shareholders, not management, and who can truly determine pay for performance over pay for failure.'